Chancellor John Healey is set to deliver his first Budget on 28 October 2026, with a focus on shifting financial power away from Westminster to local communities. Healey has emphasized that the Budget will adhere to fiscal rules, control borrowing to lower inflation, and provide relief to families and businesses struggling with rising prices due to the ongoing Israel/US conflict with Iran.
The Office for Budget Responsibility (OBR) will release updated economic and public finance forecasts, extending its outlook to 2031/32 for the first time. The previous forecast, from March 2026, did not account for the escalating Middle East conflict, which the OBR warns could significantly impact global and UK economies.
Despite higher energy prices from the conflict, the UK economy has shown resilience, with GDP growth among the fastest in the G7. The information and communications technology sector has been a key driver, boosted by AI adoption. However, inflation is expected to rise above 4% in early 2027, prompting the Bank of England to consider raising interest rates for the first time in 2026.
Public finances remain a challenge, with government borrowing at around 8% of spending. Debt interest has more than doubled since 2019/20, consuming £1 in every £13 of government expenditure. The Chancellor faces pressure to meet fiscal rules while managing higher borrowing costs and potential increases in welfare spending by 2030/31.